Capital gains problem

[Cliff_Thurber]

I just entered our capital gains information (Schedule D, etc.). The gain is about $10,000. After adding the gain into TurboTax and the amount of our federal tax refund DID NOT CHANGE but our state tax refund did change! How can this be? This is making me not trust TurboTax, after many years of using it (all the way back to Mac-In-Tax). How can I fix this?

I am a Mac user, if I was a Windows user I would drop TurboTax and switch to H&R Block right now.

[rjs]

Is the capital gain short-term or long-term? If it's long-term and if your total income, including the capital gain, is low enough, the long-term gain might be taxed at a 0% rate on your federal tax return. Most states do not give special treatment to long-term capital gain.

This is just a guess. It's hard to tell without being able to see your tax return. There could be something else going on. (Don't post your tax return here. This is a public web site.) The income range for the 0% rate on long-term capital gain depends on your filing status, and it's based on your taxable income, not gross income, so it could be affected by adjustments and deductions.

If your tax is calculated on the Qualified Dividends and Capital Gain Tax Worksheet, line 9 of the worksheet shows the amount that is taxed at 0%.

[Cliff_Thurber]

Thanks for your response. The gains are 90% long term. Our gross income will exceed $350,000.

[Cliff_Thurber]

I am starting a fresh return from scratch, going through every step. I will monitor exactly how our refund changes when capital gains are entered, saving before and after screenshots to demonstrate the problem to Intuit.

[rjs · Accepted solution]

It's not enough to just look at the amount of your refund. There are a lot of complicated interactions among various entries on your tax return. The capital gains should appear on Form 1040 line 7, or be added to any amount that's already on that line. That should increase your total income on line 9 by the same amount. To figure out what's going on, you have to look at everything after that, from line 10 through line 38, to see what else is changing or not changing, and by how much. If an amount changes that comes from another form or schedule you might have to look at the other form or schedule to see why it changed.

If Form 1040 line 7 does not change when you enter the capital gains, then either you are not entering the capital gains correctly, or you do not have the amount of gain that you think you have.

Also, you said "Our gross income will exceed $350,000." You can't draw any conclusions about what will be. Your comparison before and after the capital gains are entered is not meaningful unless you have already entered everything else. To make a valid comparison the return has to be complete except for the $10,000 of capital gains.

[Cliff_Thurber]

Just FYI, our return was nearly finished when I encountered this (so I know quite well what our 2024 gross income level is). I was doing capital gains stuff last because I thought I needed to enter more than 100 transactions by hand (our 1099-B had no document ID and the bank could/would not provide one!!), but I learned you can sometimes get away with entering a summary since the IRS gets the whole 1099-B.

I am hoping that starting the whole return over from scratch does the trick.

[ThomasM125]

One possibility is that you had capital loss carryovers from the previous year in an amount greater than your capital gains so the addition of the gains was cancelled out.